Treasury's Bank Enterprise Award Program: Impact on Investments in Distressed Communities Is Difficult to Determine, but Likely Not Significant

GAO-06-824 Published: Jul 31, 2006. Publicly Released: Jul 31, 2006.
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Highlights

Established in 1994, the Department of the Treasury's Bank Enterprise Award (BEA) program provides cash awards to banks that increase their investments in community development financial institutions (CDFI) and lending in economically distressed communities. CDFIs are specialized institutions that provide financial services to areas and populations underserved by conventional lenders and investors. In 2005, Treasury provided nearly $10 million in BEA awards. The BEA program has faced longstanding questions about its effectiveness and experienced significant declines in funding in recent years. This report (1) examines the extent to which the BEA program may have provided banks with financial incentives and (2) assesses the BEA program's performance measures and internal controls. To complete this study, GAO reviewed relevant award data; interviewed Treasury, bank, and CDFI officials; and assessed the BEA program's performance measures and internal controls against GAO's standards for effective measures and controls.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Treasury To help ensure the integrity of the BEA award payment process, the Secretary of the Treasury should revise the guidance for reviewing program applications so that program staff are required to (1) geocode property addresses where appropriate and (2) document their efforts to verify property addresses.
Closed – Implemented
Treasury has adopted policies requiring BEA applicants to electronically report addresses for distressed community financing activities to electronically report all addresses for distressed community financing transactions, regardless of dollar amount. In addition, Treasury has revised its guidance for staff reviewing program applications to require that they geocode all transactions over $250,000 (not just all transactions over $500,000 as had been the practice previously) and to provide documentation of such actions. Treasury also has revised its guidance to program staff to require that they analyze a statistically significant sample of transactions less than $250,000, thereby providing additional assurance that such transactions are carried out in BEA-eligible census tracts.

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